But what would have been the returns and outcome if I did not bother much about the markets and just invested mechanically and systematically into the STI ETF?

Assumptions:

1. Since the 15HWW portfolio is currently about 60% invested in equities, for a better apple-to-apple comparison, only $8,000 would be invested into the STI ETF every quarter.

2. $30 of transaction cost would be added to each purchase.

3. The remaining $4,500 for each quarter will be parked in cash/bonds that generate 2-3% interest. Let’s assume quite reasonably that $126,000 will grow to become $145,000 at the end of the period.

And here’s the results (screenshots from excel):7 Observations & Reflections:

The value of 71,400 shares of STI ETF ($240,618) + the total amount of dividends received ($23,550) + the value of the cash/bonds($145,000) gives a final total portfolio value of $409,168 for this hypothetical simulation. The annualised return is about 4.5%.

If we only focus on STI ETF’s annualised return, it is slightly higher at 5.2%. But honestly, this is still pretty pathetic if we are indeed near the end of a bull market. A 20% drop would wipe out all the accumulated returns. The Singapore market is really one of the worst geographical markets to be investing in for the past 7 years.

This also means that the Singapore market is unlikely to be overvalued at this point in time. If there is no big correction in the world markets, especially in the US, there is a good chance the local index could catch up in the next couple of years.

Even though 64% ($8000/$12,500) was invested in the market, it’s quite interesting that the equity portion at the end of 7 years comprise only 59% of the portfolio. The main reason is that dividends contributed the majority of STI ETF’s return during this period. The STI ETF is only marginally higher as compared to 7 years ago.

If we compare 4.5% to 15HWW’s portfolio performance of 6%, it’s really not that much of a difference. It drives home the point that it is hard to outperform the benchmark and definitely even harder to outperform it by a huge margin.

Even though index investing lost in this contest, did the 15HWW portfolio really win? Well, I only have an additional $20,000 to show after 7 years of effort, sweat and anguish. There is an argument that I should have focused on other aspects of my life rather than split hairs picking winners in the local market.

Once again, there is only about $20,000 of difference at the end of the day. This gives credence to the idea that at the early stage of wealth building, the returns do not really matter. It’s the savings that’s doing 80-90% of the hard lifting.

12 thoughts on “What If I Had Invested In The STI ETF For The Past 7 Years”

Thanks for the analysis. I’d think that for the 1.5% difference, I’d rather spend my time earning more money instead of analyzing stocks. I don’t think I have the expertise to pick the right stocks.

But that said, the point that the Singapore market is the worst market to invest in does make sense. I’m wondering if I’m better off putting more money in global markets (ETF) instead. At the risk of other factors like currency, etc. of course.

Guys, don’t mean to sound arrogant but if u wish to learn how to outperform the market by a greater margin, are open-minded and don’t mind putting in the time & effort to learn, go grab Matthew Galgani’s book, “how to make money in stocks (getting started)”. The book title may sound cheesy but there’s plenty of simple wisdom in it. Go read it. If u like to have further discussions, feel free to email me at isaac_hua@hotmail.com (not issac), I’ll be more than happy to help. All the best.